Securities Law Blog

On August 30, 2016, the SEC announced that it had issued an award of more than $22 million to a whistleblower.  The SEC explained that the whistleblower’s detailed tip and extensive assistance helped the agency halt a well-hidden fraud at the company where the whistleblower worked.  While the SEC did not provide any information on the person’s identity or the company involved, citing federal law and the need to protect confidentiality, it was reported elsewhere that the award of $22,437,800 was tied to an $80 million settlement between the SEC and Monsanto related to accounting improprieties involving the company’s top-selling Roundup product.  By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.

The award is the second largest since the SEC whistleblower program was started in 2011.  The largest award of $30 million was issued in 2014.  Whistleblowers may be eligible for an award when they voluntarily provide the SEC with unique and useful information that leads to a successful enforcement action.  Whistleblower awards can range from 10% to 30% of the money collected when the monetary sanctions ordered exceed $1 million.

With this latest award, the SEC’s whistleblower program has now paid more than $107 million to 33 whistleblowers under the Dodd-Frank Wall Street Reform and Consumer Protection Act, an increase of $50 million since our March 23, 2016 blog post.  All payments are made out of an investor protection fund established by Congress that is financed through monetary sanctions paid to the SEC by securities law violators.  No money has been taken or withheld from harmed investors to pay whistleblower awards.

Congress established the whistleblower program to incentivize whistleblowers with specific, timely and credible information about federal securities law violations to report such improprieties to the SEC. As reported by the SEC, to date, enforcement actions resulting from whistleblower tips have resulted in orders for more than $504 million in financial remedies, of which $346 million has been returned to harmed investors.

Since the inception of the whistleblower program, the SEC’s Office of the Whistleblower has received more than 14,000 whistleblower tips from individuals in all 50 states and the District of Columbia and 95 foreign countries.  Tips from whistleblowers have increased from 3,001 in fiscal year 2012, the first full fiscal year that the Whistleblower Office was in operation, to nearly 4,000 in 2015, an approximately 30% increase.